Indian possesses a federal structure in which a clear distinction is made between the union and states function and sources of revenue. Our Constitution provides residual power to the Center. Article 264 and 293 explain the financial relations between the Union and States Government.

Although the states have been assigned certain taxes which are levied and collected by them, they also share in the revenue of certain union taxes which are levied and collected by the Central Government but whole proceeds are transferred to the states.
The Constitution makes a clear division of fiscal powers between the Center and the State Governments.
A. The List I of Seventh Schedule of Indian Constitution enlists the union taxes which are as follows:
 1. Taxes on income other than agricultural income
2. Corporation tax
3. Custom duties
4. Excise duties except on alcoholic liquor and narcotics not obtained in medical or toilet preparation.
5. Estate and succession duties other than on agricultural land of individuals and companies.
6. Taxes on the capital value of assets except the agricultural land of individuals and companies.
7. The rate of stamp duties on financial documents.
8. Taxes other than stamp duties on the transaction of stock exchanges and future markets.
9. Taxes on sales or purchase of newspapers and on advertisement therein.
10.Taxes on railway freight and fares.Terminal taxes on goods or passengers carrier by railways, sea or air.
11. Terminal taxes on goods or passengers carrier by railways, sea or air.
12. Taxes on sale or purchase of goods in the course of inter-state trade.
(B) List II of Seventh Schedule enlists the taxes which are within the jurisdiction of the states:
 1. Land revenue
2. Taxes on the sale and purchase of goods, except newspapers
3. Taxes on agricultural income
4. Taxes on land and buildings
5. Succession and estate duties on agricultural land
6. Exercise on alcoholic liquors and narcotics
7. Taxes on the entry of goods into a local area
8. Taxes on the consumption and sale of electricity
9. Taxes on mineral rights (subject to any limitations imposed by the parliament)
10. Taxes on vehicles, animals, and boats
11. Stamp duties except those on financial documents
12. Taxes on good and passengers carried by bond or inland waterways
13. Taxes on luxuries including entertainment, betting, and gambling
14. Tolls
15. Taxes on professions, trades, callings, and employment
16. Capitation taxation
17.Taxes on advertisements other than those contained in newspapers
(C) Apart from taxes levied and collected by states, the constitution has provided for the revenue of certain taxes on the union list to be allotted, partly or wholly to the state. These provisions fall into various catagories:
 1. Duties which are levied by the union government but are collected and appropriated by the states. These                   includes stamp duties, excise duties on medical preparations containing alcohol and narcotics.
2. Taxes which are levied and colleted by the union, but the entire proceeds of which are assigned to the States, in            the proportion determined by the Parliament. These taxes include:
1.  i) Succession and Estate duty.
     ii) Terminal taxes on goods and passengers
     iii) Taxes on railway freight and fares
     iv) Taxes on transactions in stock exchanges and future markets
     v) Taxes on sale and purchase of newspapers and advertisement therein.
2. Central taxes on income and union excise duties are levied and collected by the union but are shared by it with the      states in a prescribed manner.
3. Proceeds of additional excise duty on mill made textile, sugar, and tobacco which are levied by the union since              1957  in replacement of state sales taxes on these commodities, are wholly distributed among the states in a                  manner as  to guarantee their former incomes from the displaced sales taxes.
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